Investors with an interest in Medical - Drugs stocks have likely encountered both Assertio (ASRT) and Zoetis (ZTS). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, Assertio is sporting a Zacks Rank of #2 (Buy), while Zoetis has a Zacks Rank of #4 (Sell). This means that ASRT's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
ASRT currently has a forward P/E ratio of 5.60, while ZTS has a forward P/E of 30.45. We also note that ASRT has a PEG ratio of 0.56. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. ZTS currently has a PEG ratio of 2.81.
Another notable valuation metric for ASRT is its P/B ratio of 1.05. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, ZTS has a P/B of 14.86.
These metrics, and several others, help ASRT earn a Value grade of A, while ZTS has been given a Value grade of D.
ASRT is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that ASRT is likely the superior value option right now.
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